The Battle for the Domestic CT Market: Key Strengths of United Imaging, Neusoft, and Mingfeng

Source: China Medical Device Industry Association - July 1, 2022, 17:00 Beijing

Overview: A New Unicorn to Go Public, with the Star Market Already Accepting Its Application

On June 29, 2022, the Shanghai Stock Exchange (SSE) website updated that Mingfeng Medical's application to list on the Star Market was accepted. After 11 years since its establishment, this leading domestic CT manufacturer has entered a phase of significant change.

According to Mingfeng Medical's IPO prospectus (draft), the company plans to issue no more than 150 million shares, representing between 10% and 18.58% of the total post-issue shares. All shares issued will be new, with no public offering of shares by existing shareholders. Haitong Securities is acting as the sponsor institution.

The funds raised will be allocated to the following projects:

Mingfeng Medical was founded in 2011 and is one of the few domestic companies capable of producing high-end CT and PET/CT devices. It is also one of the few domestic manufacturers to successfully develop a 256-slice ultra-high-end CT scanner. The company is also expanding into MRI, ultrasound (US), and digital radiography (DR) equipment.

Financial Performance: A Persistent Loss Despite Growth in Sales

Mingfeng Medical’s sales of CT products have shown continuous growth over the past three years. Revenue from CT products in 2019, 2020, and 2021 was 2.1 billion yuan, 3 billion yuan, and 3.5 billion yuan, respectively, with a compound annual growth rate (CAGR) of 28.96%. In 2021, the company ranked 6th in China by the number of CT units sold, with a market share of 4.3%, making it the third-largest domestic player. However, the company is still not profitable.

The financial data reveals that from 2019 to 2021, Mingfeng’s revenues were 2.11 billion yuan, 3 billion yuan, and 3.52 billion yuan, respectively, while its net profit was negative during the same period: -213 million yuan, -231 million yuan, and -207 million yuan. As of December 31, 2021, the accumulated retained earnings stood at -1.43 billion yuan, indicating a significant loss.

Challenges and Criticisms: A Long Journey to Profitability

Despite Mingfeng’s steady sales growth, it has faced criticism due to its consistent financial losses. Some critics have raised concerns about the company's financial viability, highlighting its strategy of investing in high-tech R&D in an industry dominated by a few global players, such as General Electric (GE) and Siemens.

Mingfeng has been criticized for relying on funds from other industries, including cement manufacturing, in its early years. The company, however, emphasizes that the high-tech nature of the medical imaging equipment market, with its long R&D cycles, technical complexity, and heavy capital demands, has forced it to invest heavily in research and development, resulting in continued losses.

For instance, Mingfeng’s R&D expenditures for 2019, 2020, and 2021 were 249 million yuan, representing 28.87% of its cumulative revenue over those three years. The company claims that the lack of profitability and accumulated losses do not pose a significant risk to its business development, as it continues to make progress in replacing high-end CT products with domestic alternatives and increasing market penetration, particularly in lower-tier cities.

Market Landscape: Fierce Competition Among Domestic Giants

Mingfeng’s CT business remains its primary revenue driver, contributing over 80% of total income in 2021. However, it faces significant competition in the domestic market.

United Imaging, Neusoft, and Mingfeng are the key players in the 256-slice ultra-high-end CT segment. In 2021, according to data from Frost & Sullivan, the top five players in the Chinese CT market, by sales volume, were United Imaging, GE Healthcare, Siemens Healthineers, Neusoft, and Philips Healthcare. These companies controlled over 80% of the market, with United Imaging alone holding more than 20%.

In addition to CT, Mingfeng has also received approval for its MRI, DR, and US products, but is still in the early stages of scaling production. Competition in these fields remains intense, with several well-established domestic and international players vying for market share.

Key Competitors:

United Imaging Healthcare:

Founded in 2011, United Imaging has rapidly become a dominant player in the Chinese medical imaging market, offering products across CT, MRI, PET/CT, DR, and medical cloud services. In 2021, United Imaging reported revenue of 7.25 billion yuan, with its CT products accounting for 34.21% of its total sales. The company leads in domestic market share, particularly in the 64-slice and above CT segment.

Neusoft Medical:

Established in 1998, Neusoft Medical is a key player in the CT, MRI, DR, and ultrasound sectors. In 2020, Neusoft generated 2.46 billion yuan in revenue, with CT contributing 52.6% of its total sales. The company is also a leader in exporting CT units and is recognized for its strong presence in the domestic market.

Mindray:

Founded in 1999, Mindray focuses on life support, in vitro diagnostics, and medical imaging. Its imaging segment, which includes ultrasound and X-ray systems, generated 5.43 billion yuan in revenue in 2021. While Mindray is a leader in ultrasound, its medical imaging business continues to grow and gain ground in the CT market.

Anke Medical:

Anke Medical, founded in 1986, specializes in large medical imaging equipment, including CT and MRI devices. It is another strong domestic competitor with a growing presence in the imaging equipment market.

Wandong Medical:

Established in 1955, Wandong Medical is a long-standing player in medical imaging, focusing on CT, MRI, DR, and other diagnostic tools. In 2021, its revenue was 1.16 billion yuan, with a leading position in the DR product market.

Kaili Medical:

Founded in 2002, Kaili Medical is a major player in the ultrasound and endoscope markets, with a focus on core technologies related to color Doppler ultrasound systems.

The Future: Competing in the High-End Medical Equipment Market

The medical imaging device market, particularly the CT sector, is highly competitive and capital-intensive. In 2021, the global CT market was valued at approximately $14.6 billion, with projections indicating it will reach $24.2 billion by 2030, with a compound annual growth rate (CAGR) of 5.8%.

The Chinese market, growing rapidly, has become a key battleground for global and domestic players alike. As the country continues to shift toward domestically produced high-end medical equipment, companies like Mingfeng are well-positioned to benefit from favorable government policies, rising demand for mid-to-high-end CT equipment, and a steady push for domestic substitution.

With the rapid advancement in AI integration and photon-counting CT technology, Mingfeng and its competitors are racing to upgrade their products and services, aiming to stay ahead in the competitive medical imaging market. However, achieving scale and profitability will require sustained investment and innovation, especially as the industry moves toward higher-end imaging technologies like AI-enhanced diagnostics and real-time processing.